Teenage Unemployment Highest Ever Recorded

Today’s jobs report didn’t deliver any real surprises. The number of payroll jobs fell by 216,000 in August, slightly less than expectations, but revisions to earlier months subtracted an additional 49,000 jobs. The unemployment rate rose to 9.7%, more than expected and consistent with the consensus view that unemployment will exceed 10% in coming months.

In short, we are still losing jobs, but at a much slower pace than earlier in the year.

Looking further into the details, there are two things I’d highlight. First, the U-6 measure of unemployment, which includes workers who are discouraged or working part-time for economic reasons, increased even more than the regular unemployment rate, rising from 16.3% to 16.8%:

Second, unemployment among teenagers in August was the highest ever recorded. More than 25% of teenage workers were unemployed in August, topping the previous peak of 24.1% set in late 1982:

Teenage unemployment jumped sharply from July to August, rising from 23.8% to 25.5%, an increase of 1.7 percentage points. In comparison, unemployment among adult men increased by “only” 0.3 percentage points and among adult women by 0.1 percentage point.

I predict that the econo-blogosphere will feature some healthy debate about whether the sharp increase among teenagers has anything to do with the most recent increase in the minimum wage that went into effect toward the end of July (and, therefore, after the July unemployment data were collected). As you would expect, teenagers are more likely to earn the minimum wage than are adult workers. If the latest minimum wage increase had immediate, negative effects on employment, you might therefore expect to see it among teenagers.

On the other hand, the chart shows that teenage unemployment can be quite volatile from month to month; as a result, analysts should be humble about what they can infer from the changes observed during a single month. Moreover, teenage unemployment has been rising rapidly throughout the downturn, which may reflect the intensity of the economic weakness rather than a series of increases in the minimum wage.

My advice: Before accepting or rejecting the idea that the recent minimum wage hike has hurt teen employment, wait to see whether any enterprising economists come up with compelling data that go beyond the month-to-month pattern. For example, it would be interesting to see comparisons among states. Some states had minimum wages above the federal level, and thus were unaffected by the recent increase.

Donald Marron is an economist in the Washington, DC area. He currently speaks, writes, and consults about economic, budget, and financial issues.

From 2002 to early 2009, he served in various senior positions in the White House and Congress including:
* Member of the President’s Council of Economic Advisers (CEA)
* Acting Director of the Congressional Budget Office (CBO)
* Executive Director of Congress’s Joint Economic Committee (JEC)

Before his government service, Donald had a varied career as a professor, consultant, and entrepreneur. In the mid-1990s, he taught economics and finance at the University of Chicago Graduate School of Business. He then spent about a year-and-a-half managing large antitrust cases (e.g., Pepsi vs. Coke) at Charles River Associates in Washington, DC. After that, he took the plunge into the world of new ventures, serving as Chief Financial Officer of a health care software start-up in Austin, TX. After that fascinating experience, he started his career in public service.

Donald received his Ph.D. in Economics from the Massachusetts Institute of Technology and his B.A. in Mathematics a couple miles down the road at Harvard.